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Impact of Solar Panels on Electricity Prices

Solar panels in Australia

What Impact do Home Solar Panels have on the Wholesale Electricity Price in Australia?

People have embraced the idea of saving on electricity costs by installing solar panels for their home in Australia. While we all feel good about helping to ‘save the planet’, reducing the carbon emissions to our atmosphere, the driving factor for most Australian’s that install solar energy systems for their home is to reduce their electricity costs.

The cost of electricity has increased dramatically this past year, and for many Australian’s, their electricity bill is one of the largest expenses they incur when trying to reconcile the family budget.

The Gillard government’s Carbon Tax disincentive targets the top users and polluters of carbon emissions in Australia. I say disincentive because the approach is to add a tax, an additional burden on the cost of doing business; wouldn’t a better approach have been to add incentives to this same group for developing and integrating the use of clean energy alternatives?

In 2009, the Australian federal government did however introduce incentives to home owners by way of rebates in the form of small-scale technology certificates (STC’s), solar credits, with a multiplier effect, if they installed solar energy panels and connected the system to the public grid. These incentives reduced over the years, starting with a 5x multiplier effect in 2009, with solar credits phased out completely on December 31 2012 having then a 2x multiplier effect; 6 months ahead of the first proposed date. This resulted in over 880,000 solar systems to be installed under the scheme since November 2007.

On 16th November 2012, in a media release from Greg Combet, the Minister for Climate Change and Energy Efficiency, announcing the early end to the scheme, he said:

Phasing out the multiplier early will strike the appropriate balance between easing upward pressure on electricity prices and supporting households and suppliers who install solar PV. The overall reduction in electricity bills is estimated to be in the order of $80 to $100 million in 2013… By 2014 the small-scale scheme is expected to cost electricity consumers around 70 per cent less than in 2012.

The small scale scheme; which has cost householders $3.2 billion over the past two years alone, forms part of the Australian federal government’s renewable energy target for at least 20 per cent of Australia’s electricity supply to come from renewable sources by 2020.

State and territory governments in Australia have implemented feed-in tariffs to support the take-up of domestic solar systems. A feed-in tariff entitles a household that installs solar panels to earn a rate for the electricity they feed into the pubic grid, sometimes at a premium to the retail electricity price. This premium rate subsidises the installation of solar systems by off-setting the home owner’s up-front cost of purchasing a system more rapidly than if they were just being paid the standard retail rate for electricity from the electricity supplied to the grid.

There has been an initial, additional cost to the supply of electricity to us because of these schemes, any discounts or rebates have to be paid for, and if you do not have solar panels installed, you are ultimately paying for those that do with higher electricity prices and for those people that have installed solar panels, the rise in electricity costs is saving them even more, but the long term result of having less reliance on coal based electricity production, especially at times where the use of air-conditioners is high, due to the increase of solar electricity being fed back into the grid from solar panel installations, should ease wholesale electricity prices.

All essential services supplied however, including electricity is a revenue raiser for government coffers, so if the government wished to raise extra money, increasing the cost of electricity supplied to your house is a target. As more homes add solar panels, reducing the revenue the government receives from the drop in billable electricity, they will look elsewhere to recoup that loss; especially in the short to mid term while the cost of coal based produced electricity is still relied upon to supply the bulk of our domestic needs.

About Nigel Brookson

Website Designer, Philanthropist, Entrepreneur. Environmentalist. Follow me on
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What people have said:

  1. Solar energy in Australia is much talked about these days as an alternative clean energy source of electricity, primarily focusing on the use of solar photovoltaic panels installed on roofs to produce direct current electricity (DC) that is fed back in to the grid as alternating current (AC) via an inverter, saving on electricity costs while reducing the carbon emissions that fossil based fuels, such as coal create.

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